Accounts Project Budgetary system Analysis of Prism Cements Limited

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Executive Summary:
Project Title: Budgetary control systems of Prism Cement Limited Company Name: Prism Cement Limited Budgetary control system analysis which is the topic of this project refers to an assessment of the viability, stability and profitability of a business. This important analysis is performed usually by finance professionals in order to prepare financial or annual reports. These financial reports are made with using the information taken from financial statements of the company and it is based on the significant tool of Ratio Analysis. These reports are usually presented to top management as one of their basis in making crucial business decisions. While making the project on Prism Cement Limited, we had to do the analysis of the balance sheet which was prepared by the accounting team of the company. This experience was an emphasis on the importance of the Ratios which could be the roots of decisions made by management that can make or break the company. So, we were influenced to allocate the aim of this project to study the details about these ratios and their possible effects on the decisions made by not only people inside the company but also the outsiders such as investors.

Accounts Project Budgetary system Analysis of Prism Cements Limited

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Prism Cement Limited

Our Vision : To be acknowledged as a leading player in the industry with the highest level of integrity. Our Mission : Introduction: Prism Cement Limited is Indias largest integrated Building Materials Company; with a wide range from cement, ready-mixed concrete, tiles, bath products to kitchens. The company has three Divisions, viz. Prism Cement, H & R Johnson (India), and RMC Readymix (India). Prism Cement Limited also has a 74% stake in Raheja QBE General Insurance Company Limited, a JV with QBE Group of Australia. Division 1: PRISM CEMENT Prism Cement commenced its production in August 1997 and manufactures Portland Pozzollana Cement (PPC) with the brand name 'Champion' and Ordinary Portland Cement (OPC). It has the highest quality standards due to efficient plant operations with automated controls. It caters mainly to markets of UP, MP and Bihar, with an average lead of 340-370 km of its plant at Satna, MP. It has a wide marketing network with about 2,000 dealers serviced from 46 stocking points. Prism currently sells over 3 MTPA of cement and clinker and is in the process of establishing another unit at the same location with a proposed cement capacity of 3.6 MTPA by 20102011. It is also in the process of setting up a 4.8 MTPA capacity cement plant in Andhra Pradesh by 2013-2014. This will take its overall capacity above 11 MTPA. State of the art cement plants Transparent dealings with all stakeholders Committed to the principles of good corporate governance

Accounts Project Budgetary system Analysis of Prism Cements Limited

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Division 2: H & R JOHNSON (INDIA) Established in 1958, H & R Johnson (India) is the market leader in the field of ceramic tiles in India. HRJ has consistently maintained its leadership position in the field of tiles over the past five decades. Today, HRJ enjoys the reputation of being the only company in India to offer end-to-end solutions of Tiles, Sanitaryware, Bath Fittings and Kitchens. Under its flagship brand, Johnson, HRJ offers glazed wall and floor tiles, bath products, kitchens, laminate and engineered wooden flooring. Marbonite brand offers a complete range of vitrified tiles, and Endura offers industrial tiles and tiles for special applications like bathrooms / high traffic areas / swimming pools etc. HRJ has recently launched top-end, premium range of products under Johnson Ceramics International brand. HRJ has a strong service network of technicians and engineers spread across the country. This network complements the range of bath products by offering various services like installation, trouble-shooting, repairs, and AMC. HRJ also has a toll-free customer helpline: 1-800-22-7484. HRJ's sales volume for the year 2008-09 was 37 million m2 of tiles and plans to achieve 90 million m2 by 2014-15. You are invited to visit www.hrjindia.com Division 3: RMC READYMIX (INDIA) RMC Readymix (India) is the third-largest ready-mixed concrete manufacturer in India. Setup in 1996, RMC currently operates 57 ready-mixed concrete plants in 27 cities/towns across the Country. RMC has also ventured into the Aggregates business and operates large quarries and crushers. At present, RMC has 6 quarries across the country. RMC has been at the forefront in setting high standards for plant and machinery, production and quality systems and product services in the ready-mixed concrete industry. RMC plans to scale-up its capacity from 3.87 million m3 at present to 11 million m3 by 2014-15.

Accounts Project Budgetary system Analysis of Prism Cements Limited

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Product: Prism Cement manufactures and markets Portland Pozzollana Cement (PPC) with the brand name Champion and the full range of Ordinary Portland Cement (OPC) of 33, 43 and 53 Grades. Champion Prisms largest selling product is a general-purpose cement popular for all applications during house construction by individuals. Prism Cements OPC is in demand for specialised cement concrete applications like high-rise buildings, bridges, manufacturing AC sheets, pipes, poles etc. Rich deposits of high quality limestone, highly automated and sophisticated controls ensure that the cement manufactured by Prism meets the highest quality standards. All the cement manufactured by Prism Cement carry the BIS Certification Mark. In fact, the strength and other characteristics are much higher than the BIS requirements. Excellent quality has placed Prism Cement in the premium price segment. Services: A Technical Services Cell manned by civil engineers has been instituted with the objectives of: Technical promotion of Prism Cement to Architects / Masons / Contractors, the main influencers for cement buying decisions by individuals. To provide on-site services to individual house builders 1. Education about correct construction practices and economic use of cement 2. To inspect the house under construction, pin-point construction errors and suggest corrective actions 3. Guidance in casting of RCC roof slabs The Technical Services Cell is helping in further increasing the brand preference for Prism Cement Technology: Special Design Features of the Plant:

Accounts Project Budgetary system Analysis of Prism Cements Limited

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1. The entire cement manufacturing process of the Plant is based on the latest state-ofthe-art technology. 2. Major Plant equipment is supplied by renowned suppliers like F. L. Smidth, Denmark and its Indian subsidiary, Koppern (Germany), Aumund (Germany). 3. Modern Control & Automation systems are supplied by FLS Automation & ABB. 4. Computerized mining activities using three dimensional imaging for optimum blending of raw material. 5. Vertical Roller Mills for efficient grinding of Limestone. 6. Six stage low pressure drop Cyclone Preheater for lower power consumption. 7. Online computerised quality control by X-Ray Fluorescence (XRF) and X-Ray Diffraction Spectrometer, in conjunction with Blend Expert software from FLSmidth to ensure requisite raw mix and to have consistent quality of raw meal, clinker and cement at all stages. Fuzzy logic control for Kiln and Cement Mill to ensure instantaneous corrective response through computer based control system. A combination of energy efficient Roller Press and Ball Mill for quality grinding of Clinker in order to produce best quality Cement. Pollution Control Systems e.g. ESPs and Bag Filters supplied by Alstom & Thermax to keep clean environment. NABL certified full automated Quality Control Laboratory to ensure stringent control on raw materials, semi-finished and finished products. Electronic Packers supplied by Ventomatic for accurate packing of Cement Bags. Automatic Truck Loaders & Wagon loaders for loading of Trucks & Rakes. Plant is operated on electricity supplied by MPEB. It also has DG Sets which can take care of power needs in case of emergency.

Accounts Project Budgetary system Analysis of Prism Cements Limited

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INTRODUCION TO BUDGET & BUDGETARY CONTROL The management is efficient if it is able to accomplish the objective of the enterprise. It is effective when it accomplishes the objectives with minimum effort and cost in order to attain long-range efficiency and effectiveness. The management must chalk out its course in advance. A systematic approach to facilitate effective management performance is profit planning and control or budgeting. Budgeting is therefore an integral part of management in a way, a budgetary control system has been described as a historical combination of a goal setting machine for increasing an enterprises profits and a goal achieving machine for facilitating organizational co-ordination and planning while achieving the budgeted targets. MEANING OF BUDGET: It is a financial and quantitative statement, prepared and approved prior to a defined period of time of policy to be pursued during that period for purpose of attaining a given objective. It may include income, expenditure and employment capital. In other words is a pre-determined detailed plan of action developed and distributed as a guide to current operations and as a partial basis for the subsequent evaluation of performance. MEANING OF BUDGETORY CONTROL: It is the process of establishing of departmental budgets relating the responsibilities of executives to the requirements of a policy, and the continuous comparison of actual with budgeted results, either to secure by individual action the objectives of the policy a firm basis for its revision. First of all budgets are prepared and then actual results compared with budgeted numbers and actual figures will enable the management to find out discrepancies and take remedial measures at a proper time. The budgetary control is continuous process, which helps in planning and co-ordination. It provides a method of control too. A budget is a means and budgetary control is the end result. In the word of J.A Solt budgetary control is the system of management control and accounting in which all operations are forecast and so as possible planned ahead and actual results compared with the forecast and the planned ones.

Accounts Project Budgetary system Analysis of Prism Cements Limited

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REQUISITES FOR A SUCCESSFUL BUDGETARY CONTROL SYSTEM For making a budgetary control system successful requisites are required. 1. CLARIFYING OBJECTIVES: The budgets are used to realize objectives of the business. The objective must be clearly spelt out so that budgets are properly prepared. In the absence of clear goals, the budgets will be unrealistic. 2. PROPER DELEGATION OF AUTHORITY AND RESPONSIBILITY: Budget preparation and control is done are every level of management. Even though budgets are finalized at top level but involvement of persons from lower levels of management is essential for their success. This necessitates proper delegation of authority and responsibility. 3. PROPER COMMUNICATION SYSTEM: An effective system of communication is required for a successful budgetary control. The flow of information regarding budgets should be quick so that these are implemented. The upward communication will help in knowing the difficulties in implementation of budgets. The performance reports of various levels will help top management in budgetary control. 4. BUDGET EDUCATION: The employees should be educated about the benefit of budgeting system. There should be benefits of budgeting system and employees should be educated about their roles in the success of this system. Budgetary control may not be taken only as a control device by the employees but it should be used as a tool to improve their efficiency. 5. FLEXIBILITY: Flexibility in budgets is required to make them suitable under changed circumstances. Budgets are prepared for the future, which is always uncertain, even though budgets are prepared by considering the future possibilities but still some adjustment. Flexibility makes the budgets more appropriate and realistic.

Accounts Project Budgetary system Analysis of Prism Cements Limited

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6. MOTIVATION: Budgets are to be implemented by human beings. Their successful implementation will depend upon the interest shown by the employees. All persons should be motivated to improve their working so that budgeting is successful. A proper system of motivation should be introduced for making this system a success.

TYPES OF BUDGETS:

LONGTERM BUDGETS

INTERIM BUDGETS

TYPES OF BUDGETS

SHORTTERM BUDGETS

CURRENT BUDGET

Accounts Project Budgetary system Analysis of Prism Cements Limited

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1. LONG -TERM BUDGETS: The long-term budgets prepared for a long period of five to ten years. They are concerned with planning the operations of a firm over a considerably long period of time. The financial controller exclusively for the top management usually prepares long-term budgets. These budgets are very useful in terms of physical units (i.e. quantities) or percentages, since accrued values may be difficult to forecast over such long-period. Capital expenditure, research and development budgets, etc, are examples of long-term budgets. 2. SHORT TERM BUDGETS: Short-term budgets are budgets prepared for a short period of one to two year. They are prepared for those activities the trend in which cannot be for seen easily over long periods. These budgets are very useful in case of consumer goods industries such as sugar, cotton, textiles, etc. they are generally prepared in terms of physical units (i.e.. quantities) as well as monetary units (i.e. values) materials budget. Each budget etc, are example of shortterm budget. They are useful to lower level of management for control purpose. 3. CURRENT BUDGETS: Current budget is a budget, which is established for use over a short period of time and is related to current conditions. Thus current budgets are essentially short term budgets adjusted to current (i.e., present or prevailing) condition or circumstances. They are prepared for a very short period. Say, a quarter or a month. They related to current activities of the budgets. 4. INTERIM BUDGETS: Interim budgets are budgets, which are prepared in between two budget periods. These budgets may get integrated with the budget of the following period.

Accounts Project Budgetary system Analysis of Prism Cements Limited

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BUDGET AND BUDGETARY SYSTEM IN PRISM CEMENTS LTD. ZERO BASED BUDGETING: Zero-based budgeting is the latest technique of budgeting and it has increased use as a managerial tool. This technique was first used in America in 1962, by the former president America, Jimmy Carter. As the name suggests, it is starting from a scratch, the normal technique of budgeting is to use previous years cost levels as a base for preparing this years budget. This method carries previous years inefficiencies to the present year because we taken last year because we taken last year as a guide, and decide what is to be done this year when this much was the performance of the last year. In zero based budgeting every year is taken as a new year and previous year is not taken as a base, the budget for this year will have to be justified according to present situation, zero is taken as a base and likely future activities are decided according to present situations. In zero base budgeting a manager is to justify why he wants to spend. The performance of spending on various activities will depend upon their justification and priority for spending will have to be proved that an activity is essential and the amounts asked for are really reasonable taking into account the volume of activity.

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Accounts Project Budgetary system Analysis of Prism Cements Limited

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ANALYSIS AND INTERPRETATION

THE PRISM CEMENT LIMITED REVENUE BUDGET TABLE-I

SL.NO

PARTICULAR

Budgeted estimated for the 2012-13 (Rs. In Crores)

Actual for the year 2012-13 (Rs. In Crores)

Sales Fixed cost recovery Variable cost recovery 724 840 72.4 84.0 618 740 61.8 74.0

Fuel price adjustment recovery

820

82.0

863

86.3

Own consumption Total of 1 2 3 Average incentives Other income GRAND TOTAL (1+2+3)

132 2516 102 56 2674

13.2 251.6 10.2 5.6 267.4

148 2369 98 49 2516

14.8 236.9 9.8 4.9 251.6

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Accounts Project Budgetary system Analysis of Prism Cements Limited

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INTERPRETATION The data pertaining to the generation and consumption of cement at Prism Cement limited have been obtained from the year 2012-13 and represented in table -1. The aspects included are total generation of cement in (Rs Crores) and utilization for auxiliary consumption, raw material consumption and line stone respectively. During the year 2012-13 the sales, fixed costs, variable cost, fuel price, own consumption was decreased. The estimated budgeted of sales consumption is 236.9% respectively than what has been actually produced. During the year 2012-13 the average incentives decreased by 9.8% and Other Income also decreased 4.9% respectively. Finally with regards to the result in revenue budget of Prism Cement industries limited in totality decreased by 251.6% in the year 2012-13 respectively.

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Accounts Project Budgetary system Analysis of Prism Cements Limited

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THE PRISM INDUSTRIES LIMITED

Operational Expenditure Budget for the Year 2012-13

TABLE II
BUDGETED ESTIMATED FOR THE 2012-13 (Rs in Crores) AMOUNT 1 VARIABLE COST Raw Material Lime stone Total of 1 2 OPERATIVE MAINTENANCE COST Chemical water Repair & maintenance Employee cost Stationary general expenses Rebate Share of operating expenses Total -2 3 FINANCE CHARGES Deprecation Interest on fixed capital Total of 3 42 18 60 4.2 1.8 6.0 15 20 35 1.5 2.0 3.5 130 280 320 65 11 8 814 13.0 28.0 32.0 6.5 1.1 0.8 81.4 150 300 350 80 13 10 903 15.0 30.0 35.0 8.0 1.3 1.0 90.3 420 450 870 42.0 45.0 87.0 450 470 920 45.0 47.0 92.0 RS/MT ACTUAL FOR THE YEAR 2012-13 (Rs. in Crores) AMOUNT RS/MT

SL.NO

PARTICULARS

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Accounts Project Budgetary system Analysis of Prism Cements Limited

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GRAND TOTAL (1+2+3)

1744

17.44

1916

191.6

INTERPRETATION The above table indicates the operational expenditure budget of Prism cements industries limited for the year 2012-13.

In the year 2012-13 variable cost components of raw material consumption increased by 45% and the lime stone consumption 47% also increased.

In operating & maintenances cost components chemical & water, repair & maintenance, employee cost, stationary & general expenses, rebate and share of other expenses is all are fluctuating with the expenses of the year 2012-13. However the total operating maintenance costs are 90.3% decreasing respectively.

In finance charges, depreciation and interest on fixed capital, has been included The total finance charges recorded a decrease of 3.5% in the year 2012-13 respectively.

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CASH FLOW STATEMENT for the year ended 31st March, 2013

For the year ended 31st March 2013 A. Cash flow from Operating Activities Net Profit before Tax Depreciation Loss /profit on fixed assets sold/ discarded Loss on sale of long term investment(other than trade) Income from long term investments(other than trade) Interest paid/payable on loans etc. Interest received/receivable on loans etc. Provision for doubtful debts/advances/deposits written back Provision for doubtful debts / deposits(net) Debts / advances / deposits written off Long term investments(other than trade) written off Liabilities no longer required written back Unrealised loss/gain on foreign currency Provision for distribution in value of investments Operating profit before working capital changes Adjustments for: Inventories Trade and other receivables Trade payables Cash generated from operations Direct taxes (paid/ refund (net) Net cash from operating activities 3,41,78,32,892 58, 30, 54,022 5, 45, 85, 229 3,58,952 (4,91,46,581) 33,50,30,375 (2,50,55,563) (3,82,15,119) ------5,34,50,670 7,700 (2,09,73,828) (2,95,96,073) --------4,28,13,42,377 (1216975334) (501740397) 65,61,02,594 2,91,87,29,240 (934980671) 1,98,37,48,569

For the year ended 31st March 2012 80, 92, 92,132 51, 57, 16,762 (5, 76, 15, 772) -------(2,61,37,527) 32,75,37,771 (9,05,21,425) -------93,44,394 55,77,394 -----(4, 47,92,390) 19,15,075 1,10,09,232 1,46,13,41,338 (249424615) 2,92,62,268 (200135318) 1,04,10,43,693 6,31,57,979 1,10,42,01,672

B. Cash flow from investing activities

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Accounts Project Budgetary system Analysis of Prism Cements Limited Purchase of fixed assets Sale of fixed assets Proceeds from sales of refractory unit (Sold in 2004-05) Investments in shares Proceeds from sale of share etc. Income from long term investments Loans/ deposits given Revision of loans / deposits given Interest received on loans etc. Net cash used in investing activities C. Cash flow from financing activities Money refused (including securities premium) Proceeds from : Long term borrowings Short term borrowings Payments for debentures Repayments of Long term borrowings Short term borrowings Increase in cash credit and overdrafts from banks Interest paid Dividends paid (including taxes) Net cash from financing activities Net increase in cash and cash equivalents Openings cash and cash equivalents Cash and cash equivalents taken over consequent Upon amalgamation Closing cash and cash equivalents (41,72,287,739) 6,22,31,087 1,50,00,000 (2,86,224) 13,42,476 4,91,45,881 (65,05,00,000) 1,00,80,00,000 2,13,22,677 (36,65,030,842)

MET (22,20,313,891) 6,83,68,985 60,00,000 (20,187,974) ------2,61,37,527 (11,59,000,000) 1,48,08,25,000 8,07,36,966 (17,28,033,387)

3,150 3,47,00,00,000 11,53,25,82,966 (859,660) (703,100,557) 11,99,34,40,000 23,36,27,575 (482,722,502) (350,699,081) 1,70,53,90,985 2,41,08,712 24,83,13,629

4,500 1,93,00,00,000 5,53,69,08,223 (23,73,255) (48,37,39,218) (59,14,230,841) 7,66,75,770 (338,431,360) (130,542,125) 67,42,71,694 5,04,39,979 19,78,35,867

------27,24,22,341

37,783 2,48,36,13,629

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CONCLUSION

Every organization has pre-determined set of objectives and goals, but reaching those objectives and goals only by proper planning and executing of the plans economically. The Prism Cement Industries Limited is objectives of planning promoting and organizing an integrated development of Cement Company. The corporation mission of Prism Cement Industries is to make available and quality cement in increasingly large quantities, the company will spear head the process of accelerated development of cement sector by expeditiously. The organization needs the capable personalities as management to lead the organization successfully, the management makes the plans and implement of these plan are expressed in terms of budget and budgetary control. The Prism Cement Industries Limited has budget process in two stages. One is the capital expenditure budget and another is operating maintenance budget, the capital expenditure budget shows the list of capital projects selected for investment along with their estimated cost, operating & maintenance budget refers to the repairs & maintenance budgets, the special budgets are rarely used in the organization like long-term budgets, research & development budget and budget for consultancy. The goal of Prism Cement Industries Ltd. is to make available qualitative cement through efficient resources and implementation of sophisticated technology and cement generation in addition also creating ambience of collective working of its employees.

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SUGGESTIONS Planning has become the primary function of management since most of the planning relates to individual and individual proposals. Budgets are nothing but these expressions, largely in financial terms. Budgetary control has, therefore become an essential tool of management for controlling and maximizing profits.

The company objectives of the organization and how they can be achieved through budgetary control. Time tables for all stages of budgeting follow. Reports, statements, forms and other record to be maintained. Continuous comparison of actual performance with budgeted performance.

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Bibliography:
http://www.prismcement.com/

FINANCIAL ACCOUNTING - L N CHOPDE FUNDAMENTAL OF FINANCIAL MANAGEMENT - PRASANNA CHANDRA ANNUAL REPORT OF PRISM CEMENT INDUSTRIES LIMITED

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